Median balance at 65 for KiwiSaver drawdown to current 50-year-olds

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Ongoing KiwiSaver contributors aged 50 have an expected median balance of $124,400 in today’s dollars when they turn 65, according to a new report.

Thursday, November 24th 2022, 7:47AM 1 Comment

by Andrea Malcolm

The Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries modelled the distribution of future KiwiSaver balances to see how much today’s 45 to 59-year-olds could have available for drawdown in retirement.

The ‘Future KiwiSaver balances and implications for retirement policy’ report follows a RIIG July analysis which showed the current distribution of individual KiwiSaver accounts across the population aged 45 and over. Both use anonymised account-level data from a sample of KiwiSaver accounts from several providers.

Future KiwiSaver balances at age 65 will follow the picture of current balances, with a cluster of helpful, if modest, balances for most and some high balances. Leaving aside ongoing non-contributors, a quarter of contributing current 50-year-olds are estimated to have a KiwiSaver of less than $70,800 at age 65 and three-quarters less than $201,800 in present day values. The average of $164,900 is pulled up by the ‘tail’ of high balances, therefore the typical balance at age 65 is better represented by the median of $124,400, says the report.

The median balance estimated to accrue by age 65 for current contributing 45-year-olds is $156,900 compared to $72,400 for 59-year-olds. For non-contributing members who stay non-contributing, there is little, nil or even negative real growth expected from their current balances. The median balance at age 65 for persistent non-contributors is estimated to be $6,200 in present day terms for current 45-year-olds and $5,400 for current 59-year-olds. Low investment returns enable savings to just about keep pace with inflation but not much more.

Those invested in the most conservative funds with no growth assets, will likely see negative real growth as fees and inflation outstrip investment return. The report says given the modest balances that will accrue to typical contributing KiwiSaver members at least for the next ten years or so, they expect there will be limited enthusiasm to pay for personalised financial advice on drawdown.

Recommendations

• Following this work the RIIG has strengthened its five recommendations for retirement income policy.These are to: 
• retain New Zealand Superannuation separately from KiwiSaver - not means-tested,
• tackle persistent contribution breaks and prioritise policy that explores ways to avoid prolonged periods of no contributions into KiwiSaver,
• introduce drawdown guidance with a framework, including regulation to supply generalised, simple guidance on how to draw down from KiwiSaver,
• do more account-level data analysis and for the Financial Markets Authority (FMA) and Retirement Commissioner to consider how to develop insights on KiwiSaver based on account-level information with a view to whole-of-market data collection and analysis on a regular basis,
• and use relevant indicators where policy analysis considers the entire distribution of KiwiSaver balances across the population and communicate at least the median in preference to the average.

Tags: KiwiSaver

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